(MENAFN- Daily Forex) The West Texas Intermediate crude oil plunged again during the trading session on Tuesday as we continue to see a lot of negativities around the world. After all, it looks as if there is going to be a lack of demand due to a recession, and that, of course, is going to cause some issues with pricing. Furthermore, OPEC chose not to cut back on production recently, so therefore it's likely that we will continue to see oil struggle overall.
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We are approaching an area where you would expect to see a certain amount of support. The market breaking through that support will end up being a negative situation, opening the possibility of the crude oil market dropping down to the $70 level. The $72.50 level is a minor support level between here and there, so I would anticipate a little bit of noise. Nonetheless, I also believe that we are getting a little stretched to the downside, so a bounce makes a certain amount of sense.Global Demand Continues Dropping
Any bounce at this point will more likely than not offer another selling opportunity unless of course we were to do something along the lines of breaking above a 50-Day ema indicator which should offer significant resistance . Clearing that area then opens the possibility of the market trying to go to the 200-Day EMA. Anything above there would be extraordinarily bullish, but I just don't see how that happens without some type of major shift in the markets. We don't have the fundamentals to make that happen, and therefore I think we get a situation where the market is going to offer plenty of selling opportunities at the first sign of exhaustion. A simple“fade the rally” approach is probably going to be the most profitable one, at least at this point.
Another way you can play this is shorting the Canadian dollar, because there are other factors working against Canada if you choose not to chase the oil market all the way down here. Regardless, I just don't see the positive catalyst quite yet, and with the federal reserve likely to continue tightening monetary policy, I suspect that global demand will continue to drop, especially as so many of the countries around the world right now are facing major economic headwinds, and not necessarily seen in the US.
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